The State of the State 2017-18

Citizens, government, and business

This year’s report finds the UK government amid the complex challenge of leaving the EU. Inevitably, this early phase of EU exit is taking place under intense media scrutiny and passionate political debate. But while EU exit issues may dominate headlines, the public services face more local challenges as they address rising demand, budget restraint and renewed levels of concern about social inequality.

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Overview

The State of the State report provides a unique, independent analysis of the UK public sector. Produced in collaboration with think tank, Reform, the Deloitte UK insight is informed by interviews with public sector leaders, citizen research, a business survey and analysis of government data.

This year’s report is constructed around three distinctive perspectives – the citizen lens, the public sector lens and the business lens – and we hope they provide a fresh look at The State of the State.

The state of the public finances

Deficit elimination goes on – This year, the UK’s deficit is expected to come down to £58.3 billion.

The summit of the debt mountain – Official forecasts suggest that government debt could peak in this financial year at £1.8 trillion representing 88 per cent of GDP.

The end of austerity? – While public attitudes towards austerity have hardened, the UK’s deficit still stands at £58 billion and government debt has reached £1.8 trillion. The government remains committed to eliminating the deficit and paying down debt, and so a blend of continued austerity and tax adjustments may be required.

Governments of the UK

Much of 2017 has seen Northern Ireland at the forefront of political and economic uncertainty in the UK – uniquely exposed to Brexit and without a sitting executive. Economically, the country has remained resilient however, numerous factors – not least the border, the strong agri-food sector and high levels of EU funding – could make Northern Ireland’s economy particularly exposed to Brexit uncertainties in the year ahead.

The independence referendum three years ago may have kept Scotland within the union but it accelerated further devolution of borrowing, tax and welfare powers which look set to see it diverge even further from the rest of the UK in its approach to public spending and public sector reform – and that divergence could extend even further as a result of last year’s EU referendum.

This year marks the 20th anniversary of the referendum that led to Welsh devolution. Those past two decades have seen the Welsh Assembly and Government become embedded in national life, delivering polices that diverge significantly from the rest of the UK. As increased powers become available to the Welsh government, there is significant potential for its public sector to better reflect local circumstances.

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